The proposed national budget for 2020-21 financial year is an ambitious one but it is obviously business-friendly. It is focused on rescuing the economy from the downfall due to the coronavirus pandemic.
Corporate tax has been reduced and the facility of whitening black money is a welcome move. However, pressure on the internal economy will be looming due to the pandemic. Experts suggest the infection in Bangladesh might peak in August so it will be challenging for the economy.
Economists say the proposed budget for 2020-21 has a 'weak structure' as resource collection target is not realistic amid the Covid-19 situation. They say the finance minister targeted to collect revenue around Tk 3.78 trillion, which is not realistic at the moment.
It is envisaged that more than Tk 2.50 trillion will be collected this year in such a situation. It is thought that overcoming the impact of the Covid-19 in a short time is uncertain too. It is a positive sign that health, social safety net programme, and the agriculture sector have received emphasis.
But the allocation for social protection programme needs to be further increased as a large number of people lost their jobs during the lockdown. Besides, disparity increased and income of people came down. As such, social security is a very significant issue now.
There is a need for further incentives to take the economy forward. Incentives announced earlier were instantaneous and were given out to stabilise the economy.
The government is yet to conduct an economic assessment on the overall situation which might take place in August. To reach the GDP target proposed for the coming fiscal year, more stimulus packages are necessary.
The decision to slash corporate tax is praiseworthy. In order to maintain the flow of private investment, it is necessary to increase revenue without imposing new tax burden on the existing taxpayers.
The health sector requires more budgetary allocation in the Annual Development Programme (ADP) due to the coronavirus outbreak.
The highest allocations in the ADP have been given to the Local Government and Rural Development, Road Transport and Highways Department and Power Department. But in the current context, considering the coronavirus outbreak, the allocation in the health sector should be further increased.
It is also necessary to reconsider the decision to increase source tax in export industries. Global export demand has declined in the aftermath of the coronavirus outbreak. All export-oriented industries will face challenges if source tax is increased to 0.5 per cent.
However, revenue target of Tk 3.78 trillion will be difficult to collect due to negative impacts of the current pandemic on trade, commerce, industries, import, export and services. In such a situation, the government should finance the deficit from money market without reducing credit flows to the private sector.
Considering global economic losses and impacts on business in the country, the growth target would be difficult to achieve. In order to give a clear signal to the global community and local and foreign investors, experts say, the government should immediately prepare a Covid-19 recovery plan and a well-planned exit policy. Otherwise, sustenance of economic growth and LDC (least developed country) graduation would be difficult to achieve.
The four main focused areas of the government, such as - health, education, agriculture and employment - are rightly chosen. All the announced policies and allocations for these areas need to be implemented efficiently in order to maintain the country's growth path and to realise the targets.
The government should extend special support to the interested manufacturers willing to export PPEs, surgical masks and other related products and facilitate imports of raw materials.
A new horizon has opened for export diversification, Bangladesh can exploit these benefits.
Hassles for doing business need to be reduced. In that respect more automated processes as targeted by the NBR need full implementation. Online activities have been getting popularity and people are being increasingly used to the these.
The massive deficit financing from the banking sector is expected to crowd out private sector credit, which has already been sinking due to the pandemic. The government needs to spell out a clear vision of how private sector credit and investment would be promoted and facilitated in the wake of both the Covid-crisis and the large budget deficit to be financed through the banking channel.
The main goal is boosting aggregate demand and output. The government should mobilise all available means such as - savings from lower oil prices, suspension of non-priority ADP projects, and containing unnecessary expenditure.
As the country's apparel exporters are facing sustenance challenges, continuation of 1.0 per cent incentive may not be enough for them. Tax at source should remain as it is in the last year to 0.25 per cent. There is a need for detailed discussion with the industry people to set a full proof strategy.
Some business leaders, however, are sceptical about budget implementation and termed the fiscal blueprint ambitious. They hailed some tax measures in the budget, including individual's tax-free threshold and corporate tax reduction.
The government now needs to focus on how the budgetary measures will be implemented so that the country can make a speedy recovery from the current public health exigency. The business leaders say the source tax is reduced for all export sectors, but there will be no significant benefits unless advance income tax on the domestic industry is curtailed. There is also a need for proper utilisation of the allocations made for the education sector, especially to train up and develop skills of youths.
Appreciating the initiatives offered for boosting investment and employment, some businesses say the budget is inclusive, though its expenditure is huge.
Some business demanded automation and introduction of e-payment and e-TDS system, reduction of the number of VAT payments from monthly to quarterly, modernisation of the customs law and disputes, and facilitating foreign direct investment.
All said and done, it is necessary to ensure that the budgetary allocation is spent properly for the welfare of people by preventing corruption and waste. Only then the budget will be welfare-oriented.